Facebook crisis holds lessons for India and Aadhaar: we need multi-pronged regulation to ensure fair play and innovation

Editors note: As India stands at the cusp of a new era in economic growth, it is time to ask a big question: Can a nation of one billion people build a global tech giant as new frontiers of technology arrive? The answer involves understanding global economic dynamics, innovation, ownership, management, competition, regulation, finance and intellectual property rights. Firstpost is publishing a series of stories that will seek to address these issues in a manner that helps entrepreneurs, policymakers and ordinary citizens understand what it takes to reach new highs without losing one's ground in a world where threats are as real as opportunities. Here's the second piece in the series. 

On Wall Street, the four darlings of the technology industry driving a boom in the stock market are collectively called FANG (Facebook, Amazon, Netflix and Google). Not for nothing, you may say. When these giants’ technological fangs are revealed, they show an incredible ability to snoop on you -- ostensibly with your permission and in order to serve you better, but full of possibilities where data that they have on you, can be used to cajole, persuade or fool you. And those who fool Internet users may not necessarily be these companies, but others who use an ecosystem of industries or services that "harvest" data.

If hard proof was needed, we found it this week following stunning revelations of how Cambridge Analytica, a UK-based data science company, profiled 50 million Facebook users with information mapping and then bombarded them to create what one could call a data ambush. Data-driven messages sent to Facebook users wove a mysterious web that persuaded their voting behaviour to pick Donald Trump as US President. This raises questions on ethics, laws and regulation in the digital age. Facebook shares have lost billions of dollars in market value in an ominous signal that business and politics intersect on social media.

If India is to breed technological giants, it is important to keep in mind the double-edged nature of digital technologies including the Internet, mobile telephony and social media. If their global reach, speed and efficiency seem to empower ordinary consumers and citizens with the power of knowledge, choice and opinion, it unequally empowers giants like FANG to gather data and map digital footprints. On a fine day, you could call it ethical cyberstalking. On a bad day, it could lead to disruptions that can fool citizens, shape monopolies that are anti-competitive, or offer fake news or biased views that masquerade as customised insights.

India, if it wants to empower ordinary citizens on the one hand, build technology giants on the other, and at the same time preserve the essential purpose of democracy, has to think of strengthening or ushering in progressive regulation on three fronts. First, it must ensure fair competition between global giants and local competitors in a manner that nurtures innovation without predatory power. The Telecom Regulatory Authority of India (TRAI) rejected Facebook's Free Basics initiative in India on the ground that it violates Net Neutrality, which requires content and commerce to be separate from carriage.

Representational image. Reuters

The Enforcement Directorate (ED) in India has probed Amazon to see if it circumvented a ban on direct sales to domestic consumers, while the Karnataka government has probed possible tax evasion by Amazon via smart warehousing. The Competition Commission of India (CCI) recently slapped a hefty fine on Google on grounds that it had a "search bias" abusing its dominant position.

Secondly, India's regulators need to ensure that neither money power, nor conflicts of interest stand in the way of innovation, consumer interest or competition. Typically, one-stop-giants like Facebook (socialisation), Amazon (shopping), Netflix (entertainment) and Google (search) have monopolistic tendencies because they are platforms where various kinds of competitors converge -- and it is important that a platform does not become a super-competitor to those it serves with its own proprietary services without proper Chinese walls or supervision in place. Indian entrepreneurs have cribbed about "capital dumping" where a cash-rich global giant can snuff out a local challenger (especially startups) at an early stage. We need tech-savvy anti-trust regulations that are able to define market dominance and service categories properly in the digital age, because dominance need not come from cash alone; it can also come through clever algorithms, software or business models.

Thirdly, India needs to create a new regime of data hygiene. With the Aadhaar unique identification scheme caught up in a Supreme Court case amid allegations of unnecessary government surveillance and alleged leaks of confidential data online, the imperative is clear: we need Internet user education akin to what the Securities and Exchange Board of India (SEBI) does for investor education. Internet giants, as well as their local competitors, say their websites ensure privacy and choice for consumers, but what we need is informed consent, not just inertial consent that is based on half-truths. We need policies, regulations and a public awareness campaign in place to ensure that not only is privacy not breached, but people know what is done with the data that they may be unconsciously revealing to Internet companies. Sometimes, your behavior on Facebook is as good or bad as allowing a local mall to install CCTVs inside your living rooms or your kitchen. Do people really want that?

All in all, what the digital age needs is a multi-pronged legal and regulatory regime that ensures both political and economic choices and freedoms. Activists, on one front or the other, will talk of how it impinges on free speech or entrepreneurial freedom, but answers lie in the basic principles of both democracy and market economics. It is imperative to employ policy-makers and regulators who are knowledgeable about what smart technologies can do to fend off shrewd lobbyists.

"Data is the new oil" is a business motto for the 21st Century. What we need to remember is that data thefts can even result in the hijacking of new-age oil tankers, with the power to fuel confusion.

The author is a senior journalist. He tweets as @madversity.

Read the other parts of the series here:

Part 1: Right or Left? Home or away? The time has come for India to talk double-edged tech nationalism

Part 3: Visionaries or 'employeepreneurs'? India's tech unicorns hide weaknesses that deserve a hard look

Part 4: Tech nationalism is a complex game; a ‘swadeshi index’ may support the right Indian startups

Part 5: Tech needs a MAD formula: It is time for India to make the transition from 'dukandar' to disruptor

Part 6: True tech power comes from harvesting patents: ISRO, Cipla and Biocon show the way for future entrepreneurs

Part 7: Engineered in India: Technology transformation must provide solutions for sustainable development